Silver Price Forecast: XAG/USD falls to near $91.00 due to risk-on sentiment

Silver price weakens as safe-haven demand fades amid easing geopolitical risks.
President Trump said he stepped back from military threats after assurances that killings and executions would stop.
Silver’s safe-haven demand weakens as risk appetite improves after Trump said he won’t dismiss Fed Chair Powell.

Akhtar Faruqui FXStreet

Silver price (XAG/USD) extends its losses for the second successive session, trading around $91.00 during the European hours on Friday. Silver price loses ground amid decreasing safe-haven demand, which could be attributed to easing concerns over geopolitical risks and Federal Reserve (Fed) independence.

US President Donald Trump said he had stepped back from threats of military action after receiving assurances that further killings would not occur and executions would be halted. Market sentiment was also supported by reports that Israel and other regional allies urged Washington to delay any action, amid concerns over potential retaliation.

The safe-haven demand for Silver weakens as the risk-on mood improves after President Trump said he has no plans to dismiss Fed Chair Jerome Powell despite reported Justice Department indictment threats. Moreover, the US and Taiwan signed a trade agreement on Thursday aimed at boosting American semiconductor production in exchange for lower tariffs.

Silver, a non-interest-bearing asset, loses its shine as Thursday’s US Initial Jobless Claims data reinforced the likelihood that the Fed will keep interest rates on hold for the coming months. According to the CME Group's FedWatch tool, Fed funds futures continue to price in about a 95% probability that the US central bank will keep rates unchanged at its January 27–28 meeting. Fed funds futures have pushed expectations for the next rate cut back to June, reflecting stronger labor market conditions and policymakers’ concerns over sticky inflation.

Initial Jobless Claims unexpectedly fell to 198K in the week ended January 10, below market expectations of 215K and down from the prior week’s revised 207K. The data confirmed that layoffs remain limited and that the labor market is holding up despite an extended period of high borrowing costs.

Silver FAQs

Why do people invest in Silver?

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Which factors influence Silver prices?

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

How does industrial demand affect Silver prices?

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

How do Silver prices react to Gold’s moves?

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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